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S 3101

Amendment S.3101

194th Legislature (2025-2026) Introduced by Julian Cyr and 4 co-sponsors

Massachusetts would create tax-advantaged Rental Savings and First-Time Home Buyer Savings accounts to fund housing costs with tax deductions and strict withdrawal rules.

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Bill Summary · S 3101

Overview

  • Bill: S.3101 (Amendment to Senate Ways and Means amendment to FY2027 Massachusetts appropriations bill)
  • Jurisdiction: Massachusetts (Senate, 194th General Court; 2025-2026 session)
  • Introducer/Co-sponsors: Senator Tarr (primary), with co-sponsors Jamie Eldridge, Bruce Tarr, Patrick O’Connor, Julian Cyr, Peter Durant
  • Purpose: Create two new tax-advantaged savings accounts to support housing-related goals: 1) Rental Savings Account to help qualified beneficiaries cover rental costs and related eligible costs. 2) First-Time Home Buyer Savings Account to help qualified beneficiaries cover down payments and eligible closing costs for a first home.

Main Purpose and Intent

  • Establish tax-advantaged accounts to assist Massachusetts residents with:
    • Securing rental housing and related costs (Rental Savings Accounts)
    • Saving for and purchasing a first single-family residence in the commonwealth (First-Time Home Buyer Savings Accounts)
  • Provide tax deductions and exclusions for contributions and earnings, with prescribed annual and aggregate limits.
  • Create administrative guidelines for financial institutions and the Department of Revenue to administer and monitor these accounts.

Key Provisions and Changes

Rental Savings Account (Section 5E)

  • Eligibility and roles
    • Account holder: individual (can be sole or joint) who designates a rental savings account.
    • Qualified beneficiary: a resident designated to use the account for eligible costs.
    • Eligible costs: fees for renting a unit as a permanent residence, limited to first month’s rent, last month’s rent, a security deposit equal to one month’s rent, and costs of lock and key installation.
  • Eligible accounts and ownership
    • Beginning Jan 1, 2026, anyone can open a rental savings account.
    • Account holders must designate a qualified beneficiary by April 15 of the year after the account is opened.
    • Up to one qualified beneficiary per account; multiple accounts can designate different beneficiaries.
    • Joint accounts allowed if filers file a joint Massachusetts income tax return (with an exception for certain low-income individuals).
    • An account holder may hold multiple rental savings accounts, but cannot designate the same beneficiary for multiple accounts.
  • Funds and contributions
    • Only cash and marketable securities permitted in the account.
    • Contributions may come from others, with no cap on total contributions.
    • Fund management: financial institutions may deduct a service fee; no other administrative expenses are paid from the account.
  • Reporting and compliance
    • Account holders must provide detailed annual information to the Department of Revenue (DOR), including transactions and Form 1099-equivalent reporting and, if withdrawals occurred, a detailed accounting of eligible costs and remaining funds.
    • Financial institutions are not required to track fund usage, designate beneficiaries in contracts, allocate funds among beneficiaries, or report beyond what is legally required.
    • Financial institutions are not liable for ensuring eligibility, tracking withdrawals, or reporting/taying taxes related to use of the account.
  • Tax treatment
    • Deductions from Massachusetts taxable income for the account contributions and earnings, subject to limits:
    • Individual: up to $15,000 per year
    • Joint: up to $30,000 per year
    • Earnings on the account are deductible/e excluded as well
    • Maximum deduction/exclusion for a 15-year period: up to $50,000 in principal and earnings combined.
    • Funds must remain in the account until withdrawal for eligible costs; otherwise, withdrawals may trigger inclusion in taxable income and a penalty equal to the tax that would have been due, with exceptions for death, disability, bankruptcy, or transfers to another rental savings account.
  • Withdrawal rules
    • Withdrawals for non-eligible costs trigger income inclusion and penalties, with exemptions for death, disability, bankruptcy proceedings, or transferring funds to another rental savings account.
  • Forms and administration
    • DOR to develop forms for designation of accounts, designation of qualified beneficiaries, and annual reporting.

First-Time Home Buyer Savings Account (Section 5F)

  • Eligibility and roles
    • Account holder: individual who designates a first-time home buyer savings account.
    • Qualified beneficiary: a first-time home buyer designated to use the account for eligible costs toward purchasing a single-family residence.
    • Eligible costs: down payment and allowable closing costs for a single-family residence in Massachusetts.
  • Eligible accounts and ownership
    • Beginning Jan 1, 2025, anyone may open a first-time home buyer savings account.
    • Designation deadline and rules mirror the rental account: designate beneficiary by April 15 following the tax year; may be sole or joint accounts; one beneficiary per account; multiple accounts allowed with different beneficiaries.
  • Funds and contributions
    • Only cash and marketable securities permitted.
    • No limit on contributions from donors; no cap on total contributions.
  • Tax treatment
    • Deductions from Massachusetts taxable income:
    • Individual: up to $25,000 per year
    • Joint: up to $50,000 per year
    • Earnings on the account are deductible/excluded as well
    • Maximum deduction/exclusion for a 15-year period: up to $250,000 in principal and earnings combined.
    • Funds must remain in the account until withdrawal for eligible costs; otherwise, withdrawals may trigger inclusion in taxable income and penalties, with exceptions similar to the rental account (death, disability, bankruptcy, or transfer to another first-time home buyer account).
  • Reporting and compliance
    • DOR to develop forms for designation of accounts and annual reporting, including detailed transaction lists and documentation of eligible costs.
  • Administrative and liability provisions
    • Financial institutions are not required to designate or track accounts in contracts; not liable for ensuring eligibility, use of funds for eligible costs, or reporting/remitting taxes or penalties beyond existing law.

Who Would Be Affected

  • Individual residents of Massachusetts who wish to save for rent-related costs or for a first home.
  • Financial institutions operating in Massachusetts (banks, credit unions, etc.) that would administer rental savings and first-time home buyer savings accounts.
  • Massachusetts Department of Revenue (DOR), which would administer designation forms, require annual reporting, and oversee tax deductions/exclusions related to these accounts.
  • Potential beneficiaries (qualifying renters or first-time home buyers) designated by account holders.

Procedural and Timeline Aspects

  • Effective/implementation timelines:
    • Rental savings accounts: January 1, 2026 (establishment and designation provisions come into effect).
    • First-time home buyer savings accounts: January 1, 2025 (establishment and designation provisions come into effect).
  • Reporting requirements begin in the tax year after opening, with annual submissions to DOR.
  • The bill adds sections to Chapter 62 of the General Laws (new Sections 5E and 5F) detailing definitions, eligibility, account operation, tax treatment, penalties, and forms.

Summary of Impact

  • Creates two new tax-advantaged savings mechanisms to support housing affordability and mobility:
    • Rental Savings Account: helps fund recurring rental costs and specific upfront costs for renters; provides tax deductions on contributions and earnings; imposes penalties for non-qualifying withdrawals.
    • First-Time Home Buyer Savings Account: helps fund down payments and closing costs for first-time home buyers; provides substantial annual and aggregate tax benefits; imposes similar withdrawal penalties to preserve intended use.
  • Intended to encourage saving for housing needs by offering immediate tax incentives while requiring careful reporting to the DOR.
  • Administrative design emphasizes flexibility for account holders and banks, while limiting regulatory burdens on institutions (no obligation to monitor usage beyond required reporting).

Compiled from official sources — confirm details with the bill’s official record.

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